Dr. Emmanuel Ibe Kachikwu is clearly a man who is big on ideas andstrong on taking action. This explains in large part why the past two years of his energetic leadership of the oil and gas industry have recorded some of the most innovative and audacious ideas ever canvassed and implemented to make the sector more transparent, efficient, profitable and useful to the country.
From the carefully crafted 20 Fixes program which he launched in 2015 to transform NNPC to the more recent 7BIG WINS – a bold roadmap for the development of the industry- Kachikwu’s prodigious talent for bold thinking is evident.
First, consider his efforts to introduce transparency in a sector infamous for its opaque operations. Kachikwu launched the practice of publishing monthly operational reports when he was first appointed as the boss of NNPC in 2015. In his current role as minister of state for petroleum resources he has continued the practice of using monthly podcasts to engage, inform and motivate staff and stakeholders on key developments and his plans for the ministry. This underscores the high premium which he places on boosting staff morale and building internal capacity.
The ministry of petroleum resources is also gradually embracing a performance-based work culture anchored on rigorous plans and a commitment to achieving set targets.
Also noteworthy is the innovative thinking that went into the resolution of the perennial fuel crisis. When Kachikwu was appointed in August 2015 the most urgent item on his to-do list was the fuel scarcity that had grounded economic activities. Oil majors were owed several months of subsidy claims. They could not pay for imports and NNPC did not have enough funds to import and fill the gap.
Rather than focus narrowly on the usual short-term plan to appease the oil majors and achieve supply for a short period, Kachikwu instead focused on a more sustainable solution: His ambitious plan was to try to end fuel scarcity.
To do so, Kachikwu and his team in line with the vision of President Buhari came up with an innovative pricing strategy for petroleum products. He leveraged the public good will of the President and the fall in oil prices to implement a new regime of appropriate pricing of petroleum products. Though challenges remain, the solution has worked to a significant degree. Petroleum products have been consistently available, fuel queues have disappeared at the filling stations and the black market has largely disappeared.
Though the initiative has not quite ended fuel subsidies, the price modulation strategy has achieved clear benefits for the country.
The pricing scheme has also reduced rent seeking and is helping curtail cross border smuggling of petroleum products. Fuel consumption which was previously over 50 million liters a day has dropped to about 32 million liters a day. This has saved the country billions of dollars.
Even more audacious is Kachikwu’s target to end fuel importation by 2019. One part of his strategy is a plan to raise financing from international oil companies to fund the multi-billion-dollar revamp of the nation’s refineries to achieve optimal refining capacity of about 400,000bpd. Another component of the strategy is to support Greenfield refineries such as the Dangote refinery – scheduled for completion in 2019 – which would contribute a further 600,000bpd.
Great challenges remain on the path to achieving the 2019 target including the machinations of vested interests. But the infectious boldness of Kachikwu’s plans is admirable.
Kachikwu is also applying his knack for bold ideas on the chronic underfunding challenge that had stifled growth in the sector. Oil business is very profitable. But it is also hugely expensive. Billions of dollars in investments are required to fund exploration activities. For decades NNPC operated joint ventures with oil majors based on joint financing of exploration operations. NNPC constantly struggled and in most cases failed to meet its obligations to the partnership. This stopped many joint projects from taking off. Those which did were fully funded by the oil majors leaving huge cash call arrears that became a drag on government revenues. At a point the accumulated arrears were as high as $6billion.
Again, Kachikwu focused on a permanent solution. To achieve this, he is overseeing the implementation of an innovative joint venture financing scheme. Unlike the earlier one, the program takes the pressure off government by putting the private sector in the lead of providing financing for joint oil exploration operations. Under this scheme, the joint ventures are incorporated and can independently source financing from the private sector to carry out their activities. The costs are to be written off as production costs and only the net profits shared by the parties. This has ended the problematic practice of funding joint venture operations from budgetary allocations. This has taken the pressure off government revenues and boosted investment in the sector.
For a sector long defined by opaqueness, corruption and resistance to change, Kachikwu’s passionate commitment to bold solutions is making a clear difference and realizing benefits for the country.
Nantim M. Joseph
Joseph is a policy analyst based in Abuja